The South African Revenue Service (SARS) is targeting wealthy individuals as a means of improving revenue collection and compliance.
In his February budget speech, finance minister Tito Mboweni announced the establishment of a dedicated unit to improve compliance of individuals with wealth and complex financial arrangements also known as the High Wealth Individual (HWI) unit, which came into effect on 1 April 2021.
This announcement followed the adoption of a new operating model that provided an opportunity to refine SARS approach to this segments compliance.
A report published by the Organisation for Economic Co-operation and Development (OECD) shows that SARS’ new HWI unit currently has a limited focus on individuals with assets worth more than R75 million.
At present, this HWI tax base consists of 1,406 individuals, with the unit focusing on these South Africans the OECD said.
“The complexity of their tax affairs, together with the opportunities that their wealth may provide for aggressive tax planning and cross-border tax avoidance or evasion pose particular challenges and risks to SARS,” the group said.
“These unique characteristics justified a different approach to ensure voluntary tax compliance. Given their importance and potential revenue contribution, SARS endeavours to provide a differentiated approach (treatment strategy) to ensure voluntary compliance.”
We are watching you
In April, SARS sent letters to some of these wealthy taxpayers, detailing its plans for the unit and how it will look at improving collections.
It also informed the taxpayers that the unit will be directly monitoring their tax portfolio and profile. The unit said it will also assign a dedicated relationship manager which will serve as a ‘central entry point to SARS’ for the taxpayer.
“Our mandate requires us to collect revenue to enable government to build a capable state that ensures economic and social development for the well-being of all South Africans,” the letter states.
To this end, SARS said it will focus on nine key objectives:
- Provide clarity and certainty to taxpayers and traders of their obligations;
- Make it easy for taxpayers and traders to comply with their obligations;
- Detect taxpayers and traders who do not comply, and make non-compliance hard and costly;
- Develop a high performing, diverse, agile, engaged and evolved workforce;
- Expand and increase the use of data, with comprehensive knowledge management, to ensure integrity, derive insight and improve outcomes;
- Modernise our systems to provide digital and streamlined online services;
- Demonstrate effective resource stewardship to deliver quality outcomes and performance excellence;
- Work with and through stakeholders to improve the tax ecosystem;
- Build public trust and confidence in the tax administration system.
“Aligned to these strategic objectives, we have also re-organised ourselves in order to adopted a segmented approach which aims at improving our service to all taxpayers, including yourself.
“As a result SARS has established a segment dedicated to high wealth individuals, who make a significant contribution to the revenue we collect.”